Worldwide Applicance Co

question 67

Multiple Choice

Worldwide Applicance Co. put together data to measure sales performance by region of the United States. The Western region included 30% of the U.S. population and was expected to deliver a similar share of Worldwide's sales. This region ended up delivering 30% of the company's overall sales. The performance index for the Western region would be:

• A) .90.
• B) 1.30.
• C) 130.
• D) 100.

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Definitions:

Optimal Capital Structure

The best mix of debt, preferred stock, and common equity that maximizes a company’s stock price.

Financial Leverage

The use of borrowed funds to finance the acquisition of assets, with the expectation that the income or capital gain from the assets will exceed the cost of borrowing.

WACC

Weighted Average Cost of Capital; a calculation that reflects the cost of a company's financing (debt and equity) weighted by the proportion of each financing source in the overall capital structure.

Tax Shields

Deductions and credits available to taxpayers that lower the total tax liability by reducing taxable income.